Intel is spinning off its AI-focused foundry business into an independent subsidiary—a move that could turn things around for the firm. The firm has posted multibillion-dollar losses and seen its stock price fall nearly 45% in the last year.
In a Sept. 16 memo to employees, Intel CEO Patrick Gelsinger said Intel Foundry will become an independent subsidiary with its own board of directors and the ability to raise outside capital.
Intel is among the world’s largest producers of semiconductors and computer processing units. The move to spin off Intel Foundry marks an escalation in competition with its rival Nvidia, which has profited massively from creating chips and cards that cater to the specific needs of AI systems.
Intel says its foundry business will begin producing chips with its new 18A chipmaking process for its partners, including Microsoft and Amazon, beginning next year.
Gelsinger said the new spin-off plan would allow for the struggling chipmaker to “drive greater efficiency, improve profitability, and enhance market competitiveness.”
“As I’ve said before, this is the most significant transformation of Intel in over four decades. Not since the memory to microprocessor transition have we attempted something so essential,” Gelsinger said.
Intel shares closed the day up 6.4%, jumping from a price of $19.86 at market open to as high as $23.30 in after-hours trading, per TradingView data.
Intel shares closed up 6.4% on the day following the announcement. Source: TradingView
Challenges for Intel still lie ahead
Despite Gelsinger throwing his weight behind the firms’ new 18A chipmaking process, a Sept. 4 report from Reuters suggested that early tests had suffered major setbacks.
Launched in February, Foundry is Intel’s manufacturing arm focused specifically on building out chips for artificial intelligence processes. The Intel Foundry produces its chips in-house instead of expediting or outsourcing production to third-party manufacturers.
GPUs tested by a fabricator at an Intel Foundry facility in Chandler, Arizona. Source: Intel
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Additionally, Intel noted that it plans to sell part of its stake in programmable chip manufacturer Altera, a company it acquired in 2015.
Gelsinger added that Intel would cut around two-thirds of its global real estate footprint and revealed that the Biden administration had awarded the company up to $3 billion in funding to make chips for the US military.
On Aug. 1, Intel reported operating losses of $7 billion for its chipmaking arm and came in well under investor targets in its quarterly earnings report. This saw the stock sell-off by more than 30% in the following two days, its sharpest two-day nosedive in the firm’s history.
At the time, the company said it planned to lay off around 15% of its entire workforce as part of a broader cost-reduction effort. Gelsinger said the company was “more than halfway” through the process, with an end target of 15,000 employees by the end of the year.
The change comes as Intel continues to lag behind rival chipmakers, including Nvidia and Advanced Micro Devices (AMD).
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